Do Rising Prices Indicate Inflation?

A savvy investor will realize that inflation can show in a variety of assets or goods not captured by indexes. Using that fact, an investor can clearly see no present monetary inflation shows in the U.S. after including the deflation in house prices (an effect in the trillions).

To put it clearly (and to measure inflation correctly): only a dollar-volume (price x volume) increase in non-housing prices (like commodities, energy, and grains) which EXCEEDS the dollar-volume (price x volume) drop from housing prices would indicate a present policy of inflation.

The above measurement takes into account ALL goods (not just some goods, as do commonly used indexes) and the demand for money whether for trade or other reasons (i.e. 'monetary demand' - the demand to hold electronic or physical cash).

In my view, an analyst cannot rightly say that the Fed created or sustained inflation by following their policy from 2006 to 2007 when the dollar volume of housing collapses, an effect far exceeding that of the rises in energy and food.

The inflation statistics did not include housing inflation during the time it happened and inflation statistics will not properly reflect the deflation as it happens either. That's a big miss considering housing remains the primary collateral of the banking system in the U.S.

So why do non-mortgage prices continue to rise? Because the effects of PAST policy still remain.

Present consumer and commodity price inflation remains high from Greenspan's loose Fed policy from 2001 to 2005 ... and more importantly from the results of that policy redirecting real capital from more immediately needed items like oil and food to less immediately needed items like new housing (the drops in housing and rising prices of food and oil proves the point!)

Since investors cannot convert the real capital of houses to oil platforms or grain acreage, the correction will take some time and likely will induce a lot of pain from falling house prices and rising commodity prices.

So, although the Fed may yet inflate, they have not recently done so. In fact, the Fed may very likely induce deflation during a recession by their current policy.

An investor may also note that present policy remains tight by observing no permanent (as opposed to temporary) injection of reserves. If the Fed doesn't validate new short-term credit (by providing permanent liquidity or increasing the amount of "permanent" short term liquidity), that credit will eventually decline. So far at least, the Fed has not run an inflationary policy during 2006-2007.

Right now the Fed should not attempt to reverse past inflation, because to do so would necessitate inducing huge deflation in "prices the indexes do not contain" to pull down "prices the indexes contain" - that carries a significant economic cost for those businesses with products that do not appear in the inflation indexes.

If the Fed remains moderately tight, over time the economy will right itself by pulling down house prices and pushing up commodity / energy prices. The more the authorities intervene, the more difficult the transition (and the more likely authorities turn a recession into a depression).

An investor may anticipate the commodity / housing correction to continue for 5 more years under a neutral Fed policy with low overall inflation (taking into account ALL prices). A policy that deviates from neutral (either inflating or deflating) would have effects making the situation much worse.

The basic strategy remains the same as other posts: hold dollars to protect against credit contraction and hold gold / commodities for protection against the falling dollar. Foreign stock markets should continue their performance, but remain aware that they could reverse after several years because they've absorbed so much money so quickly as the U.S. presents a less attractive investment.

Comments

[Eric Balkan]

Jim, you've overlooked that the drop in housing prices is actually less than the increase in global stock prices. So that's a wash. The current credit squeeze is not a shortage of cash -- it's a shortage of trust. Banks won't lend to each other because they don't know how much toxic debt the other guy holds.
In any case, the money supply, which the Fed has been increasing by around 10-15% over the past couple of years -- estimating M3 -- does not include values of non-liquid assets. If we all owned a zillion dollars worth of land on the Moon, and the Moon was destroyed, wiping out our entire investment, that would still not be monetary deflation, i.e., a reduction in the money supply.
The Wash Post figured the cost of a Thanksgiving dinner this past Nov as being 11% higher than the previous year. Given, as Jim Rogers points out, a continued shortage of commodities, plus continued increases in Asian demand for fuel, that trend is unlikely to go away by itself.

[flow5]

Superb.
The ratio of monetary flows (MVt) representing housing is not measured in "absolutes" as you indicated. And "tight" is difficult to measure. Legal reserves haven't been "binding" or correlated for some time.
The "demand for money" is a literally a Keynesian misnomer because of the "money paradox" - by wanting more, the public ends up with less, and by wanting less, it ends up with more.
Also there is a discrepancy in your math as effective purchasing power in any given period reflects "promises to pay money" from other periods (housing variables).

[Doug Roberts]

I appreciate the reminder that the decline in housing prices is slowing inflation, even if not in CPI it will be in PCE.

[JIMB]

Eric, The Fed doesn't increase M3 ... they provide liquidity (cash, electronic cash) at a price which allows for the settlement of increases in M3.

****

Keynesian paradox doesn't hold: If the population wants to hold more purchasing power, then either the Fed supplies the additional money or prices will fall so that real money balances rise. The entire population can indeed increase their real monetary holdings.

****

Effective purchasing power in any period reflects the volume of money available in comparison to the goods available for sale.

****

"Promises to pay money" (credit) are not money and do not affect the analysis. Visit j-bradley.com and read up on the money section for clarification. Feel free to email if you want.

[flow5]

The transactions concept of money velocity (Vt) has its roots in Irving Fischer’s equation of exchange (PT = MV), where (1) M equals the volume of means-of-payment money; (2) V, the rate of turnover of this money; (3) T, the volume of transactions units. The “econometric” people don’t like the equation because it is impossible to calculate P and T. Presumably therefore the equation lacks validity. Actually the equation is a truism – to sell 100 bushels of wheat (T) at $4 a bushel (P) requires the exchange of $400 (M) once (V), or $200 twice, etc.
The real impact of monetary demand on the prices of goods and serves requires the analysis of “monetary flows”, and the only valid velocity figure in calculating monetary flows is Vt. Income velocity (Vi) is a contrived figure (Vi = Nominal GDP/M). The product of MVI is obviously nominal GDP. So where does that leave us? In an economic sea without a rudder or an anchor. A rise in nominal GDP can be the result of (1) an increased rate of monetary flows (MVt) (which by definition the Keynesians have excluded from their analysis), (2) an increase in real GDP, (3) an increasing number of housewives selling their labor in the marketplace, etc. The income velocity approach obviously provides no tool by which we can dissect and explain the inflation process. Income velocity is used in the Fed’s model, its’ model responsible for our roller coaster economy.
To the Keynesians, aggregate demand is nominal GDP, the demand for serves (human) and final goods. This concept excludes the common sense conclusion that the inflation process begins at the beginning (with raw material prices and processing costs at all stages of production) and continues through to the end.
Admittedly the data for Vt are flowed. So are nearly all economic statistics, but that does not preclude us from using them. An educated estimate is better than no estimate at all. For example, we know that the international balance of payments balances – debits equal credits, payments equal receipts, etc. The Department of Commerce statistics do not prove this, so in order to make their statistics balance, they put in an “errors and omission “balance figure. This is the triumph of good theory over inadequate facts.
The Fed first calculated deposit turnover in 1919. It reported weekly until 1941 (like M3, the series was also discontinued, in Oct. 1996). The figure “other banks’’ was used until 1996. Prior to this revision Vt included all banks located in 232 SMSA’s excluding N.Y. City. This was the best that could be done to eliminate the influence on prices of purely financial and speculative transactions. Obviously funds used for short selling do not contribute to a rise in prices. The Fed calculates these velocity figures by dividing the aggregate volume of debits of these banks against their demand deposits.
In calculating the flow of funds (MVt), I am assuming that the Vt figure calculated by the Fed is not only representative all commercial banks in the United States, but that the velocity of currency is the same as for demand deposits. Is this valid? Nobody knows.
But we do know that to ignore the aggregate effect of money flows on prices is to ignore the inflation process. And to dismiss the concept of Vt by saying it is meaningless (that people can only spend their income once) is to ignore the fact that Vt is a function of three factors: (1) the number of transactions; (2) the prices of goods and services; (3) the volume of M.
Inflation analysis cannot be limited to the volume of wages and salaries spent. To do so is to overlook the principal "engine" of inflation - which is of course, the volume of credit (new money) created by the Reserve and the commercial banks, plus the expenditure rate (velocity) of these funds. Also overlooked is the effect of the expenditure of the savings of the non-bank public on prices. The (MVt) figure encompasses the total effect of all these monetary flows (MVt).

[flow5]

Since the DIDMCA the money supply has become unknown & unknowable.

Even so, what went for M2 went for M3. And M2 erroneously includes MMFs in its definition. MMFs are the customer's of the commercial banks. They are financial intermediaries.

Monetary savings are never transferred from the commercial banks to the intermediaries; rather are monetary savings always transferred through the intermediaries. Whether the public saves or dis-saves, chooses to hold their savings in the commercial banks or to transfer them to intermediary institutions will not, per se, alter the total assets or liabilities of the commercial banks; nor alter the forms of these assets or liabilities.

Financial intermediaries (MMFs) lend existing money which has been saved, and all of these savings originate outside the intermediaries. The utilization of loan-funds or activation of monetary savings by these financial intermediaries is captured thru the velocity of their deposits (bank debits/withdrawls), not thru the volume of their demand deposits.

I.e., from the standpoint of the economy, MMF deposits never leave the CB system. And the growth of the MMFs is prima facie evidence that existing funds/savings have already been spent/invested (transferred) by their owners/savers to borrowers. I.e., this represents a double counting.

Even now, M3 is meaningless.

[flow5]

Alfred Marshall, the Cambridge economists, is responsible for developing the cash-balances approach to money. For example, if individuals collectively desire expanding their cash balances (increasing the period over whose transactions purchasing power in the form of money is held), they will initiate a chain of events which will lead to a net reduction in their aggregate holdings of cash. That is, an over-all increase in the demand for money leads to falling prices, a decline in profit expectations, reduced borrowing from the banks -- and therefore a smaller volume of cash balances. Money thus is truly a paradox - by wanting more, the public ends up with less, and by wanting less, it ends up with more. All motives which induce the holding of a larger volume of money will tend to increase the demand for money - and reduce its velocity. Therefore, if there is a flight from the dollar, there will be hyperinflation in terms of dollar denominated assets.

[flow5]

Discrepancy between the quantity MV + M'V' and total effective purchasing power in any given period results from the fact that many transactions take palace on the basis of "promises to pay money" and that money is often paid for transactions effected in a previous period.

[flow5]

First, there is no ambiguity in forecasts. In contradistinction to Bernanke (and using his terminology), forecasts are mathematically "precise” (1) nominal GDP is measured by monetary flows (MVt); (2) Income velocity is a contrived figure (fabricated); it’s the transactions velocity (bank debits, demand deposit turnover) that matters; (3) “money” is the measure of liquidity; & (4) the rates-of-change (roc’s) used by the Fed are specious (always at an annualized rate; which never coincides with an economic lag). The Fed’s technical staff, et al., has learned their catechisms;
Friedman became famous using only half the equation, leaving his believers with the labor of Sisyphus.
The lags for monetary flows (MVt), i.e. proxies for real GDP and the deflator are exact, unvarying, respectively. Roc’s in (MVt) are always measured with the same length of time as the economic lag (as its influence approaches its maximum impact; as demonstrated by a scatter plot diagram).
Consequently it has been mathematically impossible to miss an economic forecast. There are no inaccuracies, just some non-conforming & unavailable data This is the “Holy Grail” & it is inviolate & sacrosanct.
The BEA uses quarterly accounting periods for real GDP and deflator. The accounting periods for GDP should correspond to the economic lag, not quarterly. They should represent a rolling moving average.
Monetary policy objectives should not be in terms of any particular rate or range of growth of any monetary aggregate. Rather, policy should be formulated in terms of desired roc’s in monetary flows (MVt) relative to roc’s in real GDP. Note: roc’s in nominal GDP can serve as a proxy figure for roc’s in all transactions. Roc’s in real GDP have to be used, of course, as a policy standard.
Because of monopoly elements and other structural defects which raise costs and prices unnecessarily and inhibit downward price flexibility in our markets (housing being most notable), it is probably advisable to follow a monetary policy which will permit the roc in monetary flows to exceed the roc in real GDP by c. 2 percentage points. In other words, some inflation is inevitable given our present market structure and the commitment of the federal government to hold unemployment rates at tolerable levels.
Some people prefer the devil theory of inflation: “It’s all OPEC’s fault.” This approach ignores the fact that the evidence of inflation is represented by actual prices in the marketplace. The "administered&quo... prices of OPEC would not be the "asked" prices were they not “validated” by (MVt).

[flow5]

It's mathematically impossible to miss an economic forecast.

[JIMB]

flow 5 - Irving Fisher's equation is a mnemonic at best. You cannot add things of different units, therefore 1 unit of wheat + 1 cow isn't = 2 of anything that makes sense -- So MV=PQ cannot be used except as a memory device.

[flow5]

It's track record is perfect & it reflects nominal GDP = MVt

[flow5]

Banks as a system don’t loan out anything. They create money when they make loans.

Money creation is not self-regulating

You can’t take money out of the banking system (only the FED can)

Savings transferred through the intermediaries never leaves the CB system. The intermediaries are the customers of the CBs.

From the standpoint of the economy the banks shouldn’t pay for something they already have. Payments on monetary savings raise all interest rates, induce disintermediation among the financial intermediaries, shrink real-gdp, & lower CB profits.

The obvious conclusion & remedy for our housing crisis is to get the CBs out of the savings business e.g., 1966.

[flow5]

Aggregate monetary demand is not measured by nominal-gdp. It is measured by the flow of money. MVt represents the total dollar volume of all transactions; i.e., different price variants and different price units notwithstanding. This means P equals the average price of all goods & services sold & T is the total volume of transations effected. These individual transactions are additive.

The "means-of-payment... concept associated with goods & services assumes that all transactions are for "spot cash" & ignores "deferred-payment...

[flow5]

The unobtainable monetarist goal involves acquiring a technical staff for Congress as well as the Fed which does not confuse the supply of money with the supply of loan-funds; people who can make the proper distinctions between means-of-payment money and liquid assets; know the diifference between money creating institutions and financial intermediaries; recognize aggregate monetary demand is measure by monetary flows (MVt) - not nominal GDP; recognize that interest rates are the price of loan-funds, not the price of money; that the price of money is represented by the price level, that inflation is the most important factor determining interest rates operatng as it does through both the demand for and the supply of loan-funds.

This is obviously all too much to hope for, and we can reasonably expect, continued mismanagement of our money, and more and higher rates of inflation.

[flow5]

The rates-of-change in monetary flows (MVt) have been negative during the period Feb 2006 thru Dec 2007 - which parallels the decline in housing prices.

[flow5]

There are no monetarists at our universities, on the Fed's research staff, or among professional economists. There are no monetarists period. Economics is about the rates of change in the flow of funds:

The commercial banks should get out of the savings business (REG Q in reverse). What would this do? The commercial banks would be more profitable - if that is desirable. Why? Because the source of all time deposits is demand deposits - directly or indirectly through currency or their undivided profits accounts. Money flowing "to" the intermediaries actually never leaves the com. banking system as anybody who has applied double-entry bookkeeping on a national scale should know. The growth of the intermediaries cannot be at the expense of the com. banks. And why should the banks pay for something they already have? I.e, interest on time deposits.

From a systems viewpoint, commercial banks as contrasted to financial intermediaries prior to the DIDMCA; (S&Ls, MSBs, CUs), never loan out, and can’t loan out, existing deposits (saved or otherwise) including existing DDs, or TDs or the owner’s equity or any liability item. When CBs grant loans to or purchase securities from the non-bank public (which includes every institution, the U.S. Treasury, the U.S. Government, state, and other governmental jurisdictions) and every person, except the commercial and the Reserve Banks), they acquire title to earning assets by initially, the creation of an equal volume of new money-DDs.

The lending capacity of the member CBs of the Federal Reserve System is limited by the volume of free legal reserves put at their disposal by the Federal Reserve Banks in conjunction with the reserve ratios applicable to their deposit liabilities (transaction accounts), as fixed by the Board of Governors of the Federal Reserve System.

Since 1942, money creation is a system process. No bank, or minority group of banks (from an asset standpoint), can expand credit (create money), significantly faster than the majority banks expand. If the member banks hold 80 percent of all bank assets, an expansion of credit by the nonmember banks and no expansion by member banks will result, on the average, of a loss in clearing balances equal to 80 percent of the amount being checked out of the nonmember banks.

From the standpoint of the individual commercial banker, his institution is an intermediary. An inflow of deposits increases his bank’s clearing balances, and probably its free legal reserves, not a tax [sic] – and thereby it’s lending capacity. But all such inflows involve a decrease in the lending capacity of other commercial bank (outflow of cash and due from bank items), unless the inflow results from a return flow of currency held by the non-bank public, or is a consequence of an expansion of Reserve Bank credit. Hence, all CB liabilities are derivative.

That is, CB time/savings deposits, unlike savings accounts in the “thrifts”, bear a one-to-one relationship to demand deposits. As TDs grow, DDs shrink pari passu, and vice versa. The fact that currency may supply an intermediary step (i.e., DDs to currency to TDs, and vice versa) does not invalidate the above statement.

Monetary savings are never transferred to the intermediaries; rather monetary savings are always transferred through the intermediaries. Indeed, as evidenced by the existence of “float”, reserve credits tend, on the average, to precede reserve debits. Therefore, it is a delusion to assume that savings can be “attracted” from the intermediaries, for the funds never leave the commercial banking system.

Consequently, the effect of allowing CBs to “compete” with S&Ls, MSBs, CUs, MMFs and other intermediaries has been, and will be, to reduce the size of the intermediaries (as deregulation did in the 80’s) – reduce the supply of loan-funds (available savings), increase the proportion, and the total costs of CB TDs.

Contrary to the DIDMCA underpinnings, member commercial bank disintermediation is not, and has not been, predicted on interest rate ceilings. Disintermediation for the CBs can only exist in a situation in which there is both a massive loss of faith in the credit of the banks and an inability on the part of the Federal Reserve to prevent bank credit contraction, as a consequence of currency withdrawals. The last period of disintermediation for the CBs occurred during the Great Depression, which had its most force in March 1933. Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its "open market power", to prevent any outflow of currency from the banking system.

However, disintermediation for financial intermediaries-S&L... MSBs, CUs, etc., is predicated on their loan inventory (and thus can be induced by the rates paid by the commercial banks); earning assets with historically lower fixed rate and longer term structures. In other words, competition among commercial banks for TDs has: 1) increased the costs and diminished the profits of commercial banks; 2) induced disintermediation among the "thrifts" with devastating effects on housing and other areas of the economy; and 3) forced individual bankers to pay higher and higher rates to acquire, or hold, funds.

Savers (contrary to the premise underlying the DIDMCA in which CBs are assumed to be intermediaries and in competition with thrifts) never transfer their savings out of the banking system (unless they are hoarding currency). This applies to all investments made directly or indirectly through intermediaries. Shifts from TDs to DDs within the CBs and the transfer of the ownership of these DDS to the thrifts involves a shift in the form of bank liabilities (from TD to DD) and a shift in the ownership of DDs (from savers to thrifts, et al). The utilization of these DDs by the thrifts has no effect on the volume of DDs held by the CBs or the volume of their earnings assets.

In the context of their lending operations it is only possible to reduce bank assets and DDs by retiring bank-held loans, e.g., the only way to reduce the volume of demand deposits is for the saver-holder to use his funds for the payment of a bank loan, interest on a bank loan for the payment of a bank service, or for the purchase from their banks of any type of commercial bank security obligation, e.g., banks stocks, debentures, etc.

The financial intermediaries can lend no more (and in practice they lend less) than the volume of savings placed at their disposal; whereas the commercial banks, as a system, can make loans (if monetary policy permits and the opportunity is present) which amount to server times the initial excess reserves held.

Financial intermediaries lend existing money which has been saved, and all of these savings originate outside the intermediaries; whereas the CBs lend no existing deposits or savings; they always, as noted, create new money in the lending process. Saved DDs that are transferred to the S&Ls, etc., are not transferred out of the CBs; only their ownership is transferred. The reverse process, which is called “disintermediation”, has the opposite effect: the intermediaries shrink in size, but the size of the CBs remains the same.

Professional economists have no excuse for misinterpreting the savings investment process. They are paid to understand and interpret what is happening in the whole economy at any one time. For the commercial banking system, this requires constructing a balance sheet for the System, an income and expense statement for the System, and a simultaneous analysis of the flow of funds in the entire economy.

From a System standpoint, time deposits represent savings have a velocity of zero. As long as savings are held in the commercial banking system, they are lost to investment. The savings held in the commercial banks, whether in the form of time or demand deposits, can only be spent by their owners; they are not, and cannot, be spent by the banks. CB deregulation created stagflation.

From a system standpoint, TDs constitute an alteration of bank liabilities, their growth does not per se add to the “footings” of the consolidated balance sheet for the system. They obviously therefore are not a source of loan-funds for the banking system as a whole, and indeed their growth has no effect on the size or gross earnings of the banking system, except as their growth affects are transmitted through monetary policy.

Lending by intermediaries is not accompanied by an increase in the volume, but is associated with an increase in the velocity of money. Here investment equals savings (and velocity is evidence of the investment process), where in the case of the CB credit, investment does not equal savings but is associated with an enlargement and turnover of new money.

The difference is the volume of savings held in the commercial banking system is idle, and lost to investment as long as it is held within the commercial banking system. Such a cessation of the circuit income and transactions velocity of funds, funds which constitute a prior cost of production, cannot but have recessionary effects in our highly interdependent pecuniary economy. Thus, the growth of time deposits shrinks aggregate demand and therefore produces adverse effects on GDP and the level of employment (structural changes have reduced the validity of this last conclusion. Under existing institutional arrangements, an increase in time deposits results in an offsetting increase in transactions velocity - therefore no dampening effect results. If there is to be a growth in time deposits there should be an offsetting increase in velocity)...

It began with the General Theory, John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”

In almost every instance in which Keynes wrote the term bank in the General Theory, it is necessary to substitute the term financial intermediary in order to make the statement correct. Perhaps this is the source of the pervasive error that characterizes the Keynesian economics, the Gurley-Shaw thesis, Reg Q, the DIDMCA of March 31st, 1980, the Garn-St. Germain Depository Institutions Act of 1982, etc.

[flow5]

real-gdp inflation
1/1/2006 0.59 0.31
2/1/2006 0.22 0.11
3/1/2006 -0.14 -0.03
4/1/2006 -0.19 -0.07
5/1/2006 -0.22 -0.07
6/1/2006 -0.30 -0.02
7/1/2006 -0.13 -0.02
8/1/2006 -0.43 -0.18
9/1/2006 -0.40 -0.06
10/1/2006 -0.85 -0.18
11/1/2006 -0.29 -0.17
12/1/2006 0.12 -0.08
1/1/2007 0.34 0.00
2/1/2007 -0.14 -0.11
3/1/2007 -0.36 -0.17
4/1/2007 -0.27 -0.09
5/1/2007 -0.12 -0.15
6/1/2007 -0.04 -0.07
7/1/2007 0.16 -0.08
8/1/2007 0.15 -0.13
9/1/2007 -0.19 -0.09
10/1/2007 -0.48 -0.22
11/1/2007 0.14 -0.18
12/1/2007 0.44 -0.23
1/1/2008 0.80 0.15 gdp falls
2/1/2008 0.25 0.01
3/1/2008 0.01 0.02
4/1/2008 0.00 0.01
5/1/2008 0.00 0.00 interest rates bottom
6/1/2008 0.10 0.01
7/1/2008 0.13 0.01
8/1/2008 0.06 0.01
9/1/2008 -0.20 0.04
10/1/2008 -0.51 0.06 dollar falls
11/1/2008 0.20 0.05
12/1/2008 0.35 0.02

[flow5]

1966 is a perfect example

[flow5]

The largest percentage of currency crisis which purportedly (by Poole) weren't foreseen - were exclusively the Federal Reserve Board's fault.

If the world's largest economy ($13b+) has a contraction in its economy, imports will fall, & export driven countries will suffer, exacerbating the negative flow of funds, and any currency crisis.

Mexico crisis 2/17/1982 (not identified) - Peso was pegged
Listed below, currency crisis that were predictable & preventable (MVt):

(1) Black Monday Oct 19 1987 (same day)
(2) Mexico Peso crisis Dec 1994 (2 months early) Peso was pegged
(3) U.S. dollar fall in Mar. 1995 (same month)
(4) Asian financial crisis July 1997 (one month late) - without primary time series
(5) Russian financial crisis 1998 (same month) - without primary time series

[flow5]

Yea for these, our sterling pieces, all of pure Athenian mold -- ARISTOPHANES, THE FROGS

Monetary flows (MVt) peaked Oct. 1974 (the stock market bottom)
Monetary flows (MVt) peaked Oct. 1982 (1 month after the stock market bottom).
(MVt)'s lag for long-term rates peaked Sept. 1981 (this century's peak in long-term interest rates).
Monetary flows (MVt) peaked in Jun 1984 (the stock market bottom) 1 option trade beat Prechter's trading championship record with his 200+ trades
Lags are not coterminous, e.g., the stock market bottom of 1982 was identifiable a year and ½, earlier